A cynical commentary about developments in the South African financial markets and the incomprehensible activities and pronouncements of bureaucrats and politicians.

Friday, 19 September 2014

RATES AND RATINGS

There were several points to take away
from Governor Marcus’ appearance in front of the cameras at the end of the
monetary policy committee’s meeting yesterday. The most interesting one is
speculation about why she has decided to step down after just one five-year
term as Reserve Bank Governor. Surely sheer boredom must rate high on the list
of reasons. The “no change to the repo rate” announcement came after a three
day meeting. It is terrifying to even try to imagine the amount of brain-numbing
waffle and data nit-picking that must have taken place in order to fill all
that time. Three months ago the same team edged the rate up a near imperceptible quarter of a percent, but
now whatever demons were spotted then appear to have disappeared! Another
annoyance in the job might be polite but firm calls late at night from Nkandla or
Luthuli House with suggestions of how things should be. The now aborted
AngloGold unbundling deal noted that guidance on various matters had been
received from the Reserve Bank. And the African Bank debacle must have been
very wearying for the governor too. Ms Marcus must hopefully be off to do
something far more fun.

It’s getting like a ballroom dance
competition but without the spangled frocks. Long and intricate displays of
fancy foot work are taking place in order to conceal the real fact that the
government plus the large number of its dependant corporations is running ever
deeper into debt. The competition judges are the ratings agencies who are
already flipping through the score sheets to the “junk status” page and they
will any second now be holding those sheets aloft for all to see. That term is misleadingly
alarming and harsh. In practice it is simply a warning flag to lenders that in
the opinion of the agency (who, by the way, have a blemished record on these
matters) the borrowers are battling a little more than most to repay their loans.
Actual default is not at all being suggested yet and for the moment SA will
undoubtedly behave just like an “investment grade” borrower and continue to pay
timely and in full. This is why the downgrade when it comes will be received in
Pretoria with
outbursts of indignation and contemptuous dismissal. Sadly however, there is no
evidence that anyone in charge is going to do anything effective to slow the
growing debt and in due course the rating agencies might be proved right. After
all as a defaulter we do have form. Remember the “debt standstill” of 35 years
ago? In the meantime the government this week managed to borrow $500 million
for 5.75 years at a rate of just 3.9%. This is really cheap money and shows
that some of the actual lenders are not as concerned about credit risk as the
agencies think they should be.

The excited spokesman for the university
that will be home to the Thabo Mbeki Presidential Library certainly introduced
some different ideas about such facilities. According to him it will become a
“living library” that will address knowledge production and peace building.
That’s a far cry from a collection of dog-eared Marxist tomes, dodgy medical
research papers, yellowing newspaper clippings, fading internet print-outs and
used pipe cleaners that many of us would have expected to see in a collection
of the previous president’s archives.

Far too much has already been said about
that Scottish referendum, but it is interesting to note that a total of about
3.6million people voted. What a lot of noise they made. It must be the whisky.
In our election this year 18.6million votes were cast!

Suddenly the Currie Cup competition has
reached that stage where we get to play teams we had forgotten all about. The
Sharks are making really heavy weather of the whole affair and my back-up Lions
flag may come in handy as, ridiculously, we play local rugby right into
October. The 2015 Super rugby program has been published and begins only a few
weeks after the Christmas tree is taken down. Clearly this sport is now an
industry with clamouring stakeholders.